Mid-Day Opinion: Maharashtra govt’s power play

Helping farmers and making the state’s power company financially stronger are not conflicting goals. Representation Pic/iStock

The Maharashtra government's decision to waive nearly Rs 48,000 crore in unpaid electricity bills has been welcomed by farmers across the state. For many farming families, it comes as a huge relief. Agriculture has become an expensive business. The cost of seeds, fertilisers, labour, and irrigation has gone up, while income still depends on rainfall and market prices. Many farmers have simply been unable to pay their electricity bills.

Few would question the need to support farmers. But this waiver may be doing more than that. It could also be a smart financial decision that strengthens the state's power distribution company. If that is the case, the government deserves credit for solving two problems with one move.

The timing is significant. The government has already announced plans to list the state's power company on the stock market. Before investing, buyers first examine a company's financial health. They look at its profits, outstanding dues, and overall balance sheet. A company carrying nearly Rs 48,000 crore in unpaid electricity bills does not inspire confidence. Such arrears weaken the balance sheet, reduce investor confidence, and can lower the company's valuation. By clearing these old dues, the government is not only helping farmers but also improving the company's financial position before it enters the capital market. From a business point of view, this makes complete sense.

There is nothing unusual about this. Governments across the world clean up the finances of public sector companies before listing them or bringing in private investment. They reduce liabilities, strengthen balance sheets and make companies more attractive to investors. A financially healthier company usually receives a better valuation.

If Maharashtra is following the same path, it should be seen as smart financial planning, not something to hide.

If helping farmers and preparing the power company for listing are both objectives, the government should simply say so. There is nothing wrong with one decision serving two purposes. In fact, that is smart policymaking. Transparency will only strengthen public confidence.

There are, however, some important questions. The waiver does not make Rs 48,000 crore disappear. In the end it is usually the taxpayer who bears the cost. The government must also think about the thousands of farmers and households who have continued paying their electricity bills honestly despite financial hardship. They should not feel they are being punished for doing the right thing. If waivers become too frequent, people may begin to believe there is little reason to pay on time because another relief package will eventually arrive. That weakens payment discipline and creates the same problem all over again.

This is why the waiver should be treated as a one-time clean-up, not a permanent solution.

If the power company is serious about entering the stock market, it must also improve the way it operates. Better billing, timely collections, modern technology, and stricter financial discipline will matter far more than one waiver. Investors do not look only at today's balance sheet. They also want confidence that the company will not return to the same position a few years later. That will be the real measure of success.

Helping farmers and making the state's power company financially stronger are not conflicting goals. If one decision achieves both, it deserves to be seen as smart policymaking.

The only mistake the government should avoid is telling only half the story. People are mature enough to understand that one policy can serve more than one purpose. There is nothing wrong if a farmer welfare scheme also strengthens a public sector company before its market listing.

Good governance is not just about announcing relief packages. It is about taking decisions that solve multiple problems and being honest about why those decisions are taken. If this electricity waiver helps farmers today while preparing the power company for a stronger future, it could prove to be one of the smartest financial decisions taken by the Maharashtra government in recent years.

Sanjeev Shivadekar is political editor, mid-day. He tweets @SanjeevShivadek
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The views expressed in this column are the individual's and don't represent those of the paper.